As global diamond sales start to recover, it is hoped they will translate into a healthy expansion in Botswana GDP as finance minister said on Monday there are positive signs in 2011.
Kenneth Matambo, the minister of Finance and Development Planning, said during the presentation of national budget for financial year 2011/ 2012 that since 2008 the country’s economy has been performing below par.
However, he said with green shoots of global economic recovery and demand for diamonds, the economy in real terms will register an impressive growth.
“My ministry forecasts that in real terms, the economy will grow by 6.8 percent in 2011 and 7.1 percent in 2012 provided that the mining sector, as the largest single contributor to GDP, grows by at least 15 percent and 6.2 percent respectively, over the same period,” said former MD of BDC, a government investment arm.
He added that the treasury forecasts that total GDP in current prices for the current financial year will be P101.59 billion, followed by P109.5 billion in 2011/12, and P118.1 billion in financial year 2012/13.
The undiversified Botswana economy is recovering from the worst recession since the World War that saw demands slowing in the country’s key market that included US (45 percent) and Europe.
The economy grew slowly at 3.1 percent in 2008 before contracting by 3.7 percent in 2009.
The online mining experts, IDEXonline, showed that Botswana’s diamond exports reached USD 149.6 million in December 2010, bringing the total value of diamond exports for the year to USD 3.02 billion, which represents a 38.5 percent y/y increase as the global diamond industry recovered and prices rebounded. The 2010 exports follow a sharp slump in exports in 2009 as the country’s production was drastically curtailed.
Though the exports are a clear revival, they are still below the export levels in 2005-2008.
Debswana, which is the country’s main diamond miner, plans to increase production in 2011, probably aiming for 40m carats versus an estimated production of 34m carats in 2010.
On the other hand, the minister said the diamond sales in 2010 were 33 percent greater than in 2009, but it realised a healthy growth as it grew by about 10.7 percent in real terms over the four quarters ending September 2010.
“We expect improved diamond sales for 2011 and beyond, with recovery of the diamond market to pre-recession levels by 2013,” said Matambo.
“When supported by sound macroeconomic policies, prudent financial resources management, and good governance, prospects for the medium term are positive,” he added.
The total revenues and grants for the financial year 2011/12 are forecast at P34.10 billion, whilst proposed total expenditure and net lending are at P41.03 billion.
Therefore, the net result is a budget deficit amounting to P6.93 billion, which is 6.3 percent of forecast GDP.